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Time to Break New Ground and Regulate Canada’s Extractive Companies Operating Abroad

Thursday, July 7, 2016

The new Trudeau government has had its
hands full dealing with a number of important and pressing concerns both
domestically and internationally. However, the federal government must soon
turn its eye to the glaring hole in Canadian law that allows Canadian
extractive companies to engage in, and profit from, human rights and
environmental abuses in their overseas operations, often with impunity. Canada
hosts a significant majority of the world’s largest exploration and mining companies,
as well as a large number of oil and gas companies, many of which have
operations in developing countries. Over the last five years an increasing
number of civil cases have been launched in Canadian courts alleging egregious
conduct, including murder, gang rape, forced labour, torture and complicity in
war crimes, on the part of Canadian extractives, their subsidiaries and their
security contractors.[1] The most well known
case is Choc v HudbayMinerals Inc., which has been attracting
significant media attention over the past six months.[2] The case concerns three related civil actions initiated by
indigenous Mayan plaintiffs from the Guatemalan community of El Estor. The
plaintiffs allege that the security personnel employed by HudBay’s Fenix mining
project shot and killed Angelica Choc’s husband, Adolfo Ich, shot and left
paralyzed another plaintiff, German Chub Choc, and along with police and
military, gang raped Margarita Caal Caal and 10 other Mayan women.[3] Two other cases against Canadian extractive companies are currently
before British Columbia courts, one alleging complicity in forced labour and
torture, and another, alleging the use of excessive force by security personnel
against peaceful protesters.[4]

These cases represent only the tip of the
iceberg. Complaints about the overseas conduct of Canadian extractive companies
are far from rare. Individuals, groups and non-governmental organizations have also
brought complaints in non-judicial fora or reported allegations of harmful
conduct, including human rights violations on the part of members of Canada’s
extractive sector.[5] A report commissioned in 2009 by the Prospectors and Developers
Association of Canada, which was leaked in 2010, identified 171 high profile
incidents between 1999 and 2009 in which “international mining and exploration
companies were involved in community conflict, human rights abuses, unlawful or
unethical practices, or environmental degradation in a developing country”.
According to the study, Canadian mining companies had been involved in 33% of
such incidents, which amounted to four times as many incidents as companies
from India, Australia, the US or the UK.[6]

What has Canada done to address this
problem? Very little indeed. There is no legislative framework in place
requiring Canadian extractive companies to adhere to human rights standards in
their overseas operations. Nor does Canadian law provide foreign victims of
alleged corporate-related human rights violations with access to an effective
remedy. Foreign victims of abuses by Canadian extractive companies who choose
to sue in Canada face enormous obstacles in accessing justice. Most cases have
been dismissed on jurisdictional issues. Of all the civil suits brought so far
in Canada, only Choc v Hudbay case
has proceeded to the merits. Moreover, there is no independent quasi-judicial
complaint mechanism with the capacity to receive complaints of human rights
abuse and other misconduct by Canadian extractives, to investigate allegations
and to report on its findings, as an alternative to the court system. Instead, Canada
continues to rely on extractive companies to regulate themselves and the
government only provides for mediation between companies and foreign affected
communities with the aim of easing the way forward for extractive projects.

Back in 2005, the Standing Committee on
Foreign Affairs and International Trade, recommended, among other things, that
the federal government “[e]stablish clear legal norms in Canada to ensure that
Canadian companies and residents are held accountable when there is evidence of
environmental and/or human rights violations associated with the activities of
Canadian mining companies” and implement incentives to ensure corporate compliance.[7] In 2006, the Liberal government initiated nation-wide
consultations, know as the National Roundtables on Corporate Social
Responsibility (CSR) and the Canadian Extractive Industry in Developing
Countries. In early 2007, following the conclusion of the consultations, the
Roundtables Advisory Group, made up of leading representatives from civil
society, the extractive industry and academia, issued a series of
recommendations to the government for establishing a comprehensive and robust CSR
policy framework for extractives operating overseas.[8] The Conservative government took two years to respond, and in 2009
launched its CSR strategy, “Building the Canadian Advantage: A Corporate Social
Responsibility (CSR) Strategy for the Canadian International Extractive Sector”,
which disregarded the most important recommendations made by the Advisory Group,
including the establishment of an independent ombudsman with a mandate to
receive and investigate complaints of corporate misconduct abroad.[9] Instead, the 2009 Strategy merely encouraged extractive companies
to adopt or sign on to certain intergovernmental and multistakeholder
initiatives and established the Office of the CSR Counsellor, an ineffectual dispute
resolution mechanism with no power to compel companies, against whom
allegations had been made, to come to the table.

In November 2014, the government launched a
revised version of the CSR Strategy called “Doing Business the Canadian Way: A
Strategy to Advance Corporate Social Responsibility in Canada’s Extractive
Sector Abroad”.[10] The new Strategy is an
improvement on the 2009 version. It sets out some expectations of conduct of
Canadian extractive companies operating overseas and indicates that diplomatic
support and certain types of economic support provided by the government may be
withdrawn where such companies fail to adhere to the expectations of conduct or
to participate in the dispute resolution process.

Despite these important changes, the
Strategy does little to prevent corporate misconduct and to hold those that do
not comply accountable.[11] First, the
expectations of conduct are far from clear. Among other things, companies are
expected to “respect human rights”, but the Strategy fails to provide specific
and crucial guidance on what this might entail or to explicitly refer companies
on this issue to the UN Guiding Principles on Business and Human Rights (UNGPs)
(the widely accepted global standard on this issue) or the OECD Guidelines for
Multinational Enterprises (which, in its chapter on human rights, explicitly
draws on the language of the UNGPs). Rather, the Strategy simply refers companies
more generally to a variety of diverse multistakeholder and intergovernmental
initiatives, including the UNGPs and OECD Guidelines, “with the expectation
that Canadian companies will align their practices as applicable”.[12]

Second, the 2014 CSR strategy strengthened
the CSR Counsellor’s dispute settlement powers by making government economic
and diplomatic support conditional on a company’s participation in its “review
process”. But it did not transform the Counsellor’s Office into a much needed
independent complaint mechanism, with the capacity to receive and investigate
and report on allegations brought by victims of alleged corporate-related
violations of human rights or breaches of the other expectations of conduct set
out in the Strategy. The Counsellor’s review process remains a dialogue facilitation
process. He may receive complaints from “project-affected individuals or
communities” (or even extractive companies complaining about vexatious
allegations against them) and “bring the disputing parties together to help
them resolve their differences for a mutually beneficial result”.[13] Of course this can be a valuable exercise and help extractive companies
and local communities to understand each other’s positions, to compromise and
come to an agreement on how to move forward. But it does not provide victims
with an effective remedy.

Finally, the Strategy does nothing to
address the often insurmountable hurdles that victims of alleged human rights
abuses face in having their claims considered on the merits in Canadian courts.[14]

The ball is now in the Trudeau government’s
court to move beyond the approach of self-regulation and to take meaningful
steps to ensure that Canadian extractive companies do respect human rights in
their overseas operations, and, where the latter do not, to ensure accountability
and to provide effective remedies for victims. In the past year, both the UN
Human Rights Committee and the UN Committee on Economic Social and Cultural
Rights have called on Canada to take legislative action to address the overseas
conduct of Canadian extractives and provide remedies for victims.[15] The government must go further than simply tinkering with the
current CSR strategy and the CSR Counsellor’s review process. It must adopt a comprehensive
legislative framework with clear standards for Canadian companies operating
abroad and develop incentive, facilitative and even coercive legal mechanisms
to ensure compliance.[16] In addition to addressing the problem of access to justice in
Canadian courts (perhaps by exploring Federal Court jurisdiction and a federal
cause of action, or changes to the Uniform Law Conference of Canada’s Court
Jurisdiction and Proceedings Transfer Act), the government must also establish
an independent complaint mechanism, such as an ombudsman, as an alternative to
the courts. The approach by the new Liberal government taken in addressing this
pressing issue will be a litmus test for its commitment to the protection
international human rights.

[13]“Doing Business the Canadian
Way”, p. 12. Where formal mediation is needed, the Counsellor will support the
parties to bring the issue to Canada’s National Contact Point, a body it is
required to maintain under the OECD Guidelines for Multinational Enterprises.
For a discussion of the self-imposed limitations and other shortcomings of the
NCP process see Simons, “Canada’s Enhanced CSR Strategy”, note 11, pp. 194-198.

[14]For a discussion of these
obstacles and the various cases that have been launched in Canadian courts, see
Simons, “Canada’s Enhanced CSR Strategy”, note 11, pp. 198-205.